An Alternative Framework for Foreign Exchange Risk Management of Sovereign Debt

This paper proposes a measure of synchronization in the movements of relevant domestic and foreign fundamentals for choosing suitable currency for denomination of foreign debt. The selection of explanatory variables for exchange rate volatility is...

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Bibliographic Details
Main Author:	Melecky, Martin
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	BALANCE SHEET BALANCE SHEETS BANK POLICY BENCHMARK BILATERAL EXCHANGE RATE BORROWING COST BORROWING STRATEGIES BUSINESS CYCLES CAPITAL CONTROLS CENTRAL BANK CLOSED ECONOMY CONTRIBUTION CREDIBILITY CURRENCY CURRENCY COMPOSITION CURRENCY CRISES CURRENCY DENOMINATION CURRENCY EXPOSURES CURRENCY MISMATCHES CURRENCY SUBSTITUTION CURRENCY VALUE CURRENCY VALUES DATA AVAILABILITY DEBT DENOMINATION DEBT MANAGEMENT DEBT-SERVICE DEMAND FOR MONEY DEPENDENT VARIABLE DEPRECIATION DERIVATIVE DERIVATIVES DEVELOPING COUNTRIES DEVELOPING COUNTRY DEVELOPMENT ECONOMICS DEVELOPMENT OF BOND MARKETS DOMESTIC BOND DOMESTIC BOND MARKETS DOMESTIC CURRENCY DOMESTIC ECONOMY DOMESTIC INTEREST RATE DOMESTIC MARKETS DOMESTIC PRICE DOMESTIC PRICE LEVEL ECONOMETRIC ANALYSIS ECONOMIC ACTIVITY EMERGING ECONOMIES EMERGING MARKET EMERGING MARKET ECONOMIES EQUILIBRIUM ERROR TERM EXCHANGE MARKET EXCHANGE RATE EXCHANGE RATE MANAGEMENT EXCHANGE RATE MOVEMENTS EXCHANGE RATE REGIMES EXCHANGE RATE RISK EXCHANGE RATE VARIABILITY EXCHANGE RATE VOLATILITY EXCHANGE RATES EXPENDITURE EXPLANATORY VARIABLES EXPOSURE EXPOSURES EXTERNAL BALANCES EXTERNAL SHOCKS FINANCIAL INTEGRATION FOREIGN CURRENCIES FOREIGN CURRENCY FOREIGN CURRENCY DEBT FOREIGN DEBT FOREIGN EXCHANGE FOREIGN EXCHANGE DEBT FOREIGN EXCHANGE MARKETS FOREIGN EXCHANGE RESERVES FOREIGN EXCHANGE RISK FOREIGN INTEREST FOREIGN INTEREST RATE FUNCTIONAL FORMS FUNDAMENTAL DETERMINANTS GDP GOVERNMENT BORROWING GOVERNMENT BUDGET GOVERNMENT DEBT GOVERNMENT REVENUES GROWTH RATES HARD CURRENCY HEDGES HIGH-INCOME COUNTRIES INCOME INDIVIDUAL CURRENCIES INFLATION INSTRUMENT INTEREST RATE INTEREST RATE RISK INTEREST RATE VOLATILITY INTEREST RATES INTERNATIONAL BANK INTERNATIONAL CURRENCY INTERNATIONAL ECONOMICS INTERNATIONAL FINANCIAL STATISTIC INTERNATIONAL MONEY LEVEL OF RISK LEVERAGE LIABILITY LIABILITY MANAGEMENT LOCAL CURRENCY LONG-TERM COSTS LOW-INCOME LOW-INCOME COUNTRIES M2 MAJOR CURRENCIES MARGINAL UTILITY MARKET INTEREST MARKET INTEREST RATE MARKET INTEREST RATES MARKET PRESSURE MIDDLE-INCOME COUNTRIES MONETARY AGGREGATE MONETARY AUTHORITY MONETARY POLICY MONEY DEMAND MONEY DEMAND INCREASES MONEY MARKET MONEY SUPPLY NOMINAL EXCHANGE RATES NOMINAL INTEREST RATE OIL REVENUES OPTIMAL ALLOCATION OPTIMIZATION OPTIMUM CURRENCY AREA OPTIMUM CURRENCY AREAS OUTPUT OUTPUT GAP PANEL DATA ESTIMATION PEG PHILLIPS CURVE POLITICAL ECONOMY PORTFOLIO PORTFOLIOS PRESENT VALUE PUBLIC DEBT PUBLIC DEBT MANAGEMENT PUBLIC DEBT MANAGERS RANDOM VARIABLES REAL INTEREST REAL INTEREST RATE REFERENCE CURRENCIES REGRESSION ANALYSIS RELATIVE PRICE RESERVES RETURN RISK MANAGEMENT SHORT-TERM INTEREST RATES SOVEREIGN DEBT STANDARD DEVIATION STANDARD DEVIATIONS STEADY STATE STOCKS STRUCTURAL SHOCKS SUPPLY SIDE TAX TERM STRUCTURE OF INTEREST RATES TRANSACTIONS COSTS TRANSMISSION MECHANISMS UNCERTAINTY USE OF DERIVATIVES WEIGHTS ZERO WEIGHTS
Online Access:	http://documents.worldbank.org/curated/en/2008/01/8912546/alternative-framework-foreign-exchange-risk-management-sovereign-debt http://hdl.handle.net/10986/6452